Disinflation is like
a. slowing a car down, whereas deflation is like putting the car into reverse gear.
b. maintaining a car’s speed, whereas deflation is like slowing the car down.
c. putting a car into reverse gear, whereas deflation is like slowing the car down.
d. maintaining a car’s speed, whereas deflation is like putting the car into reverse gear.
Your brother-in-law wants to buy either stock or bonds in Cedar Valley Furniture, which
manufactures wooden furniture. He wants your advice on whether to buy stock or
bonds. Explain how each of his quotes below should affect his choice between the stock
and the bond.
a. “I have reason to believe that people are soon going to find rocking chairs have
health benefits.”
b. “I would like to tell people I am part owner of Cedar Valley Furniture.”
c. “I do not want to take on much risk.”
Suppose scientists provide evidence that people who drink energy drinks are more
likely to have a heart attack than people who do not drink energy drinks. We would
expect to see
a. no change in the demand for energy drinks.
b. a decrease in the demand for energy drinks.
c. an increase in the demand for energy drinks.
d. a decrease in the supply of energy drinks.
Figure 4-22
RefertoFigure4-22.What is the equilibrium quantity in this market?
a. 4 units
b. 8 units
c. 12 units
d. 16 units
Congressman Dearmark justified spending $3 million on a new entertainment complex
in his district because it will create 450 new jobs for his residents. As a student of
economics, you know that
a. this is a case of the “broken window fallacy.”
b. this is a great use of taxpayer dollars.
c. this policy diverts money from spending somewhere else in the economy.
d. Both a and c are correct.
Which of the following is most likely to result if foreigners decide to withdraw the
funds that they have loaned to the United States?
a. U.S. net exports will fall
b. U.S. net capital outflow will rise
c. U.S. domestic investment will rise
d. the dollar will appreciate
Happy Trails, a bicycle rental company, is considering purchasing three additional
bicycles. Each bicycle would cost them $249.66. At the end of the first year the increase
to their revenues would be $140 per bicycle. At the end of the second year the increase
to their revenues again would be $140 per bicycle. Thereafter, there are no increases to
their revenues. At which of the following interest rates is the sum of the present values
of the additional revenues closest to the price of a bicycle?
a. 5 percent
b. 6 percent
c. 7 percent
d. 8 percent
In economics, the cost of something is
a. the dollar amount of obtaining it.
b. always measured in units of time given up to get it.
c. what you give up to get it.
d. often impossible to quantify, even in principle.
When the money market is drawn with the value of money on the vertical axis, an
increase in the price level causes a
a. shift to the right of the money demand curve.
b. shift to the left of the money demand curve.
c. movement to the left along the money demand curve.
d. movement to the right along the money demand curve.
In a market economy, we know that a resource has become scarcer when
a. its price rises relative to other prices.
b. it is non-renewable and some of it is used.
c. people search for substitutes.
d. All of the above are correct.
Table 24-8
The table below relates to the economy of Mainland, where the typical consumer’s
market basket consists of 2 televisions and 300 hamburgers.
RefertoTable24-8. If the base year is 2014, then the consumer price index was
a. 80 in 2013, 100 in 2014, and 60 in 2015.
b. 98 in 2013, 100 in 2014, and 96 in 2015.
c. 90 in 2013, 100 in 2014, and 80 in 2015.
d. 180 in 2013, 200 in 2014, and 160 in 2015.
Real GDP evaluates current production using prices that are fixed at past levels and
therefore shows how the economy’s overall production of goods and services changes
over time.
a. True
b. False
Figure 35-9. The left-hand graph shows a short-run aggregate-supply (SRAS) curve
and two aggregate-demand (AD) curves. On the right-hand diagram, “Inf Rate” means
“Inflation Rate.”
RefertoFigure35-9. The shift of the aggregate-supply curve from AS1to AS2could be a
consequence of
a. an increase in the money supply.
b. an adverse supply shock.
c. a decrease of output from Y1to Y2.
d. a slow adjustment of people’s expectation of the inflation rate.
Table 23-6
The table below contains data for the country of Batterland, which produces only
waffles and pancakes. The base year is 2013.
RefertoTable23-10.In 2010, this country’s nominal GDP was
a. $260.
b. $440.
c. $620.
d. $760.
Table 24-10
The table below shows the prices of baseballs and baseball bats for three years. Assume
the typical consumer’s basket consists of 6 baseballs and 2 baseball bats.
RefertoTable24-10.If 2009 is the base year, then the consumer price index was
a. 83.00 in 2008, 100.00 in 2009, and 132.50 in 2010.
b. 89.97 in 2008, 100.00 in 2009, and 117.43 in 2010.
c. 90.88 in 2008, 100.00 in 2009, and 117.43 in 2010.
d. 169.50 in 2008, 186.50 in 2009, and 219.00 in 2010.
Index funds
a. typically have a higher rate of return and higher costs than managed mutual funds.
b. typically have a higher rate of return and lower costs than managed mutual funds.
c. typically have a lower rate of return and higher costs than managed mutual funds.
d. typically have a lower rate of return and lower costs than managed mutual funds.
In 2008, the United States was in recession. Which of the following things would you
notexpect to have happened?
a. increased layoffs and firings.
b. a higher rate of bankruptcy.
c. increased claims for unemployment insurance.
d. increased real GDP.
The analysis of Friedman and Phelps argues that an expected change in inflation has no
impact on the unemployment rate.
a. True
b. False
Fulltime students and homemakers are included in the Bureau of Labor Statistics’
“unemployed” category.
a. True
b. False
Matt is going to college to become a pharmacist. What he learns about existing
information increases
a. both technological knowledge and human capital.
b. technological knowledge but not human capital.
c. human capital but not technological knowledge.
d. neither technological knowledge nor human capital.
If there is an increase in the price of oil, then
a. unemployment rises. If the central bank tries to counter this increase, inflation rises.
b. unemployment rises. If the central bank tries to counter this increase, inflation falls.
c. unemployment falls. If the central bank tries to counter this decrease, inflation falls.
d. unemployment falls. If the central bank tries to counter this decrease, inflation rises.
If a country had capital flight, then the real exchange rate would
a. fall. To offset this fall the government could increase the budget deficit.
b. fall. To offset this fall the government could decrease the budget deficit.
c. rise. To offset this rise the government could increase the budget deficit.
d. rise. To offset this rise the government could decrease the budget deficit.
When all market participants are price takers who have no influence over prices, the
markets have
a. only a few buyers and sellers.
b. numerous sellers but only a few buyers.
c. numerous buyers but only a few sellers.
d. numerous buyers and sellers.
Table31-2
RefertoTable31-2. Which currency(ies) is(are) have a nominal exchange rate less than
that predicted by the doctrine of purchasing-power parity?
a. the euro and the riyal
b. the pound and the yen
c. the bolivar
d. the yen
Permanent tax cuts shift the ADcurve
a. farther to the right than do temporary tax cuts.
b. not as far to the right as do temporary tax cuts.
c. farther to the left than do temporary tax cuts.
d. not as far to the left as do temporary tax cuts.
On the Internet you find the following offers for opening an online account. Which of
them is the best offer if you have $2,000 to save for two years?
a. an interest rate of 5 percent, with the bank charging you a $15 processing fee at the
time you open your account
b. an interest rate of 3.5 percent, with the bank giving you a $35 bonus to open your
account
c. an interest rate of 4 percent, with the bank giving you a $20 bonus at the time you
open your account
d. an interest rate of 4.5 percent, with no processing fee and no bonus
Which of the following events would shift money demand to the right?
a. an increase in the interest rate or an increase in the price level
b. an increase in the interest rate, but not an increase in the price level
c. an increase in the price level, but not an increase in the interest rate
d. neither an increase in the interest rate nor an increase in the price level
As the price level falls
a. people will want to buy more bonds, so the interest rate rises.
b. people will want to buy fewer bonds, so the interest rate falls.
c. people will want to buy more bonds, so the interest rate falls.
d. people will want to buy fewer bonds, so the interest rate rises.
The multiplier for changes in government spending is calculated as
a. 1/MPC.
b. 1/(1 – MPC).
c. MPC/(1 – MPC).
d. (1 – MPC)/MPC.
If a nation produces more than it spends what do we know about:
A. its net exports?
B. its net capital outflow?
C. its saving in relation to its domestic investment?
Making rational decisions “at the margin” means that people
a. make those decisions that do not impose a marginal cost.
b. evaluate how easily a decision can be reversed if problems arise.
c. compare the marginal costs and marginal benefits of each decision.
d. always calculate the dollar costs for each decision.